Excise duty refund for imported rectified spirit used in captive manufacturing upheld after rejecting unjust enrichment claim

Refund of excise duty on imported rectified spirit used captively in manufacture was resisted on the ground of unjust enrichment. The SC accepted the respondent's affidavit that the duty incidence was not passed on because the final product's price was mandatorily fixed by a trading agency based on London Metal Exchange rates, leaving no scope to load any part of the impugned duty into the sale price. Finding no basis to disbelieve this evidence, the SC held that unjust enrichment was not attracted and declined to interfere with the HC's direction for refund. The appeals were dismissed.

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Issues involved: Competence of State Legislature to impose excise duty on rectified spirit not fit for human consumption, refund of excise duty paid on import of rectified spirit for manufacturing copper.

Competence of State Legislature to impose excise duty:
The High Court held that the State Legislature was not competent to impose excise duty on rectified spirit as it is not fit for human consumption. The appellant's counsel referred to a previous court decision where it was argued that since rectified spirit can be made fit for human consumption by adding water, excise duty can be levied on it. However, the Supreme Court, having granted leave limited to the question of refund only, declined to delve into the competence issue raised by the appellant's counsel.

Refund of excise duty:
An affidavit filed by the respondent's authorized representative stated that there was no unjust enrichment as the excise duty paid on rectified spirit was not passed on to consumers of the final product, copper. It was explained that the price of copper was determined by external factors and the duty on rectified spirit was not added to the price of copper. The Supreme Court found no reason to doubt the accuracy of this statement and upheld the High Court's direction for the refund of excise duty paid on the import of rectified spirit used in manufacturing copper. Consequently, the appeals were dismissed with no order as to costs.

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